From 1 January 2016, Solvency II is mandatory for insurance companies based in the European Economic Area. In order to protect policyholders from the risks of insolvency of insurance companies, the EU and the EIOPA (European Insurance and Occupational Pensions Authority) have issued regulations that insurance companies are obliged to comply with. According to Solvency II, insurance companies must have sufficient equity capital to guarantee policyholders' rights.

Solvency II is a modern supervisory system that follows a three-pillar approach: quantitative requirements (pillar one), qualitative requirements (pillar two) and reporting (pillar three). In order to strengthen consumer protection and inform other stakeholders, information on business activities and performance, governance system, risk profile, solvency assessment and capital management under Pillar 3 is published in the Solvency and Financial Condition Report.